Industrials
Jay Van Sciver sees 50%+ downside as macro and truck fundamentals soften, borrowing costs increase, higher book units are sold into a softer used truck market and leverage tolerance runs dry. Investors are mistaking used equipment price increases for some sort of underlying business change. This is what happened at rental car companies, which also saw the values of their fleets (and stock prices) temporarily soar. Meanwhile, R has never been more richly valued by capital markets. Consensus estimates for 2H24 and 2025 seem disconnected from downcycle realities, with mid-teens EPS (fuelled by debt funded buybacks) less likely than low single digits profits per share as truck gains run dry and competitive intensity compresses margins.
Edition: 194
- 06 September, 2024